Collecting tax year-end and compensation data can be a challenge for businesses; particularly those with international assignees. Global Mobility teams are often faced with the difficulty of having to manually share and process data that is spread across different countries, business functions, systems and languages. With so many data variants and sources, it invariably makes tax year-end and compensation collection a time consuming and error-prone process.
As well as gathering data on the usual taxable payments – like salary, bonuses and assignment allowances – Global Mobility operations also need to collate additional data on Benefit in Kind payments associated with assignee relocation. These relocation costs (covering everything from education to housing) are typically made to vendors via finance departments on an assignee’s behalf, and not via the usual payroll system.
Top challenges with tax year-end and compensation collection for Global Mobility include:
- Tracking and collating payments associated to one assignee but made in two locations – this could include split salary payments, such as salaries paid in home and host locations, or additional location allowances.
- Bonus or Long-Term Incentive (LTI) payments and the impact these may have on assignee tax
- Factoring monthly tax withholding paid on an assignee’s behalf via payroll
- Off-payroll payments associated with relocating (such as education costs and housing payments) made directly by finance outside of the payroll system.
- Obtaining data on tax and social security payments made on an assignee’s behalf.
- Making timely tax liability payments to fiscal authorities.
Covid-19 has heightened this complexity. The global pandemic we have experienced over the past 12-months has magnified the challenges around gathering and processing tax year-end and compensation data for Global Mobility.
With assignees displaced in host locations longer than originally intended, having to spend time in a third location that is neither home or host, or in some circumstances having assignments cut short so employees can be repatriated to their home location, has had knock-on effects to an assignee’s tax status.
Many tax authorities are aware of the circumstances of expatriates and many are changing legislation to factor in Covid-19 disruption. Good news for assignees and the business in terms of less tax or greater allowances, but it does add a new layer of complexity for Global Mobility teams to navigate.
Covid-19 has also accelerated the growth of virtual assignments, whereby the assignee stays in their home location but takes up a new role in another country and fulfils the role remotely. This allows the sharing of knowledge and skills without the need to travel. While it has lots of benefits for the business and assignee, it does come with a heightened compliance and HR risk.
Can tax vendors help?
The answer here is yes and no. While they are used to support the tax compliance process, the onus still sits with the Global Mobility team to provide accurate and timely compensation data. If this data is late or inaccurate it typically increases the tax vendor’s costs and delays the completion of tax compliance, which in turn has a direct and negative impact on the assignee experience.
The consequences of inaccurate data
Submitting wrong, incomplete or late data can have significant cost and time consequences for both the business and the assignee, including:
Higher vendor fees
Tax vendors will charge higher fees to assess, collect, interpret and clarify the data if what they receive is wrong or incomplete, resulting in more cost to the business and further delaying the process.
Tax return errors
The wrong data can lead to inaccurate tax calculations which create risk and could trigger potential audits. Because the assignee is usually tax equalised, data errors can result in incorrect tax gross ups that magnify the business costs. The data also drives social security withholding which cannot easily be refunded if incorrect. Such errors can result in unexpected tax bills for the assignee and additional cost to the business rectifying issues.
Late tax payments
Late tax payments as a result of slow or inaccurate data gathering, can equally have a negative impact on the assignee and business. Late submissions can all lead to fines, penalties or interest charges for both the business and the assignee. This ultimately tarnishes the assignee experience and results in the business incurring additional costs rectifying the errors.
Consistently late or incorrect tax submissions can trigger tax authorities to request a payroll audit, bringing an employer’s payment and compliance capabilities into question and resulting in significant cost to the business in completing the audit.
When it comes to end-of-year payroll reporting, discrepancies in data between home and host can lead to a mismatch, clouding the bigger-picture view of payroll and its cost to the business. More time and resource are then incurred rectifying the discrepancies.
With payments made by both payroll and finance to assignees and vendors, requests for data can often be made multiple times by different sources. This duplicates the workload of the Global Mobility, HR and Finance teams, putting additional pressure on resource and incurring extra cost.
While the wrong year-end compensation data can be financially costly to the business, it can also cause issues in the employer-assignee relationship. Errors in the process can build distrust and negatively impact the assignee experience, decreasing performance and potentially increasing levels of employee turnover.
Getting payroll processes and data right each month and correcting data errors in real-time – not just at year-end – is crucial to ensuring tax compliance and avoiding late submissions.
Global Expat Pay makes this possible. We combine data management, Global Mobility expertise, advanced technology and global payment capabilities into one simple platform. We pro-actively collect, validate and safely store assignee compensation data and payment information from multiple sources into one secure place, ensuring it can be seamlessly automated into the tax return process.
Having a single source of data helps reduce the internal effort required to ensure timely and accurate compliance reporting for assignees worldwide, while also enabling the automation of business processes that support global compliance. What’s more, providing data in a format that makes the tax compliance process more efficient can directly reduce tax vendor costs by as much as 40%.
Assignee tax compliance requirements can be accelerated by several months due to earlier availability of compensation data. Our platform also provides access to an integrated payment capability across 200 countries in 130 currencies, speeding up compliance activities and minimising the need for reworking or late filing.
Simplifying the operational processes and accelerating reporting activities not only benefit the business, but also deliver assignees a smoother tax compliance process.
Find out how we can help you overcome your tax year-end and compensation collection challenges, while reducing costs, by completing our online diagnostic tool.
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